“Where do you see yourself five years from now?”

I’m sure that at least once in your life, you’ve been asked this question. Maybe it was your high school guidance counselor trying to steer your post-high school ship? Eventually, it moved into the realm of job interviews or an older and (allegedly, in my case) wiser adult who couldn’t wait to dispense sage advice about your life plan. Thinking about it now, you grappled for an answer, thinking about your first choice of major for college or that special someone who was in your life when you were younger that you thought was going to be by your side for years to come. Looking back on it now, you shake your head wondering why you ever wanted to enter that long-abandoned field of study as you shared you life with a person you haven’t seen or thought about in years.

For someone like me who lives his life as a passenger of The Flow, I think about several different scenarios in my 5-year plan. Will I still be in the same house? Given my familial history of early male heart disease, will I be there to see it? Will the ice caps melt, leaving me on my homemade wooden skiff, forever floating upon the landless seas until the eventual invasion and enslavement from the skies by our distant alien overlords who have searched the universe for water to ensure their survival? As you can see, a vivid imagination has been a constant impediment to setting my ever-evolving 5-year plan in stone.

Unfortunately, when it comes to a single or multiple provider medical practice, imagination will not be useful in the current climate. Five years from now, quality reporting will be mandatory, as well as e-prescribing and the use of interoperable electronic health records. Add CMS’ doubling down on rooting out fraud and abuse to this equation, and suddenly the idea of operating a small, independent physician practice without a support network of IT, compliance and financial management professionals appears to be extremely difficult, if not impossible.

In this environment, many small practices are suddenly discovering the idea of strength in numbers and contemplating either selling their practice or merging with other larger physician groups. This approach presents dangers to both sides of the equation.

For the selling or pursued practice, the concerns deal mainly with sale price, but other problem areas line the road to sale. The practice needs to be certain that the larger practice has an experienced compliance and IT infrastructure that is prepared for the new environment on the horizon. For the practice’s patient population, the effect of the purchaser’s current insurance contracts must be assessed, not only to provide cost certainty for contract redundancies between the two entities, but to determine if the purchaser’s active contracts are compatible with the practice’s already developed patient population.

For the purchasing practice, the compliance risk of acquiring the new physician needs to be examined. Does the new practice have billing and coding patterns that would suddenly represent an outlier when compared to the current physician population? Do the typical services performed by the provider have the potential to lead to an increase in initial purchase price or eventual overhead costs for the purchaser? How easily will the new practice be integrated into the group when it comes to capacity for training and new system adaptability?

With the impending storm of regulatory changes fast approaching, the instinct is to attempt to get a deal done as quickly as possible. With the future of your bottom line, as well as what is in the best interests of your patients on the line, a small investment of time in the due diligence process prior to sale or acquisition can provide a healthy foundation for facing the coming changes.

10:47 am, June 4th, 2010 |